Moody Markets: Even Cloudy Weather Hurts Investor Sentiment

By Brendan Conway

Investors are rightly called moody, or maybe worse, if even a cloudy day affects their decision to buy or sell.

A study by four academics including Yale University’s William N. Goetzmannfinds that cloudier days increase investors’ perception that both individual stocks and the Dow Jones Industrial Average are overpriced. More than this, cloudy days also tend to increase the propensity of institutional investors to hit the sell button.

Toshihisa Yoshida

From the study just uploaded to the Social Science Research Network today by Goetzmann, Dasol Kim of Case Western Reserve University, Alok Kumar of the University of Miami, and Qin Wang of the University of Michigan at Dearborn:

The impact of weather patterns on perceptions of mispricing and trading activities is significant both statistically and economically. In particular, a one standard deviation change in cloud coverage generates close to 8% of the total sample variation in perceived DJIA
overpricing. Further, differences in trade imbalance between the top and bottom 10th percentile in cloud coverage represent close to 7% of the total sample variation.

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Chris Dieterich has covered the U.S. stock market for The Wall Street Journal and Dow Jones Newswires. He is a graduate of Regis University and the Missouri School of Journalism.